You've heard the VA loan program is a great way for veterans to buy homes, but what if you want to use the loan for an investment property? Can you still apply for a VA loan? The answers, it depends. Learn when you can and cannot use VA loan money for investment properties to make smart financial decisions.
What the VA Loan Program Says About Investment Properties
Since the VA loan program is intended for service members to buy homes, the program does not allow home owners to purchase single-family homes with the intention of using them as investment properties.
However, there is a workaround that allows you to take advantage of the VA loan program while also making money as a landlord: Purchasing multi-family properties. If you buy a duplex, single-family home home with an in-law unit, or another property that has multiple living spaces, you can rent out part of the property while living in the home.
For example, let's say you're looking at triple-decker homes with three separate apartments. You'll sign off indicating that you'll live in one of the apartments, then you can make money by renting out the other two units.
There is a second workaround for veterans: You can purchase a home using a VA loan, live in it for a period of time, then transition it to an investment property. If you do this, you can then buy a new full-time home for your family using any remaining money to which you're entitled under the VA loan program.
In the process of applying for the VA loan program, you'll need to certify that you intend to live in the home full-time. As such, you must live in the home as your primary residence rather than as a vacation home.
Should You Use a VA Loan for Investment Property?
Now that you understand the ways you can use the VA loan program for investment property, one question remains: Should you? Being a live-in landlord isn't for everyone, so it's important that you give some thought to whether it's the right decision before you're saddled with a mortgage.
Renting comes with uncertainties. In the best of times, you'll have great tenants and no vacancies; however, there may be months when an apartment sits vacant or you have to chase down tenants for the rent. It all depends on how tight the real estate market is where you live.
There's also a personal cost to consider. Tenants who know you live downstairs may disturb you in the evenings, at nights, or on weekends if an emergency arises. You may overhear renters if the walls are thin, and this can affect your quality of life. Things can get stressful, and the downsides of being a landlord can outweigh the financial incentives.
If you don't want to spend time marketing your apartment, meeting with renters, selecting tenants, or making repairs when needed, this might not be the right fit for you.
However, there are many advantages to owning investment property, namely financial independence and extra income. You will earn money every month, which you can use to pay down debts, save for retirement, or meet another financial goal. You might buy a place with the goal of renting out an in-law apartment then using the unit down the road to provide care for aging parents.
If you would like to give this a try, determine your budget for a home. Then find a real estate agent who can show you multi-family units near you.
Whether you decide to buy a single-family home for your family or try your luck as a live-in landlord, the first step is obtaining mortgage pre-approval from a lender who works with the VA loan program. Apply for pre-approval now, so when you find your dream home, you are in the perfect place to make an offer.